The following were the yield and basis point (bp) movements of some of the most-watched 10-year bonds this afternoon:
US: 1.99% (4bp)
UK: 2.11% (5bp)
Germany: 1.70% (7bp)
France: 2.28% (5bp)
Spain: 5.23% (5bp)
Italy: 4.20% (6bp)
[NOTE: there are 100bp to a percentage point]
In the US, 10-year bond yields rose by four basis points to 1.99% following the publication of key economic data and opinions voiced on the situation in North Korea. The Federal Reserve Bank of Dallas reported that Texas factory activity rose sharply in January with the production index reading rising to 12.9 from 3.5 previously. Other measures of current manufacturing activity also indicated stronger growth in January with the new orders index jumping 13 points to 12.2, its highest reading since March 2011. Meanwhile, Glyn Davies, US Special Representative for North Korea Policy, urged Pyongyang to return to its international obligations in abandoning its nuclear programmes. "We find North Korea that seems bent on playing a game of risk. This is dangerous," he was quoted as saying to reporters following a meeting with his Japanese counterpart Shinsuke Sugiyama in Tokyo.
UK bond yields jumped five basis points to 2.11% on a day when the Debt Management Office published minutes of meeting with gilt investors presenting the general view that the structure of the remit in 2012-2013 had worked well and that overall market liquidity had been relatively good. The notes disclosed that the gross financing requirement for 2013-2014 is currently forecast at £161bn. The bank of England published its Asset Purchase Facility Quarterly report for the fourth quarter of 2012. As of December 27th, cumulative assets purchased net of sales and redemptions totalled £375bn. Nominal gilt yields were little changed over the fourth quarter of 2012, with the yield curve flattening slightly and yields on average around 11 basis points higher than at the end of the third quarter.
In Germany, yields moved up the by seven basis points to 1.70% as the German federal government sold 12-month treasury bills worth a total of €2.07bn at an average yield of 0.1319%. This represented the first time since June that the average yield was not negative. Meanwhile, Germany's finance ministry voiced its opinion on the possibility of Cyprus receiving aid, indicating that Cyprus could only access international aid if it threatened the euro area's stability, according to a report on Bloomberg. The news agency stated that the Finance ministry had suggested that providing aid from the euro region's financial backstops was linked to legal conditions that had to be respected.
In France, yields rose by five basis points to 2.28%. This happened on the same day that €4.394bn of three-month T-bills were sold at a bid-to-cover ratio of 2.69. This compared to a previous bid-to-cover ratio of 2.53. The result indicated the first time the yield had been positive at sale since July 2012. The country also sold €1.593bn of 6-month T-bills with a bid-to-cover ratio of 2.96 and €1.594bn euros of 12-month T-bills with a bid-to-cover ratio of 2.93.
In Spain, the yields rose by five basis points to 5.23% as government data showed that Spanish mortgages on houses for the month of November had a reading of -31.6%. this compared to a reading of -14.4% previously. Spanish mortgages on Capital Loans for November gave a reading of -34.4% compared to a previous reading of -21.1%. Meanwhile the EU's Economic and Monetary Affairs Commissioner Ollie Rehn and Spanish Economy and Competitiveness Minister De Luis de Guindos, were scheduled to meet although no public statements on the meeting were expected.
In Italy, yields rose by six basis points to 4.20%. Government data showed that Italian hourly wages for December were 0.1% month-on-month. This compared to 0.1% previously. In 2012, the average wage inflation was 1.5% compared to CPI of 3.3% in 2-012. This represented the lowest start in 1983 according to Istat.